Loosen regulation, embrace risk and strengthen free-trade deals. That was the advice of a long-awaited report by a Singapore government-appointed economic committee on Thursday.
Companies and public services in the Southeast Asian city state, already known as one of the most competitive and open economies in the world, should prioritise innovation; workers should reinvent themselves with new skills; and the government should give more support to emerging industries and smaller firms, urged the Committee on the Future Economy (CFE).
The committee, formed a year ago to devise solutions to boost an economy that has slowed to 1.8 per cent growth from 15.2 per cent in 2010, outlined its advice in a 109 page report that advocated seven broad strategies.
These ranged from supporting research and development and streamlining government grant schemes to riding the digital wave and upgrading the country’s transport infrastructure.
The Singapore government accepted the recommendations and said that ministers would provide a full response during the upcoming Budget, which will be read on February 20.
Painting a sombre outlook on the global economy, the CFE said the world had seen a “dark shift away from globalisation in 2016”.
“It no longer seems certain we are on an inexorable course towards greater globalisation, stronger multilateral institutions and a more connected world. Instead, we saw nativist politics and protectionist economics growing in strength and influence in Europe and the US,” said the committee, chaired by Singapore’s Finance Minister Heng Swee Keat and Trade and Industry (Industry) Minister S Iswaran.
“The anti-globalisation trend will undermine international trade, hurting all economies, particularly small open ones like Singapore, with two-thirds of our gross domestic product (GDP) generated by external demand.”
Singapore was dealt a blow earlier this year when US President Donald Trump pulled the US out of the Trans-Pacific Partnership. Meanwhile, right-wing politicians are gaining traction with voters in a handful of European countries set to hold elections this year.
At the same time, the global economy has seen structural shifts that have resulted in slower growth. Technological change is also accelerating, disrupting traditional industries such as the taxi industry even as new ones are created.
Amid the whirlwind of change, Singapore had no choice but to adapt as it always had, said the CFE.
The report paid particular attention to small- and medium-sized enterprises, urging them to use new technologies, engage in more research and development and expand into new markets.
Singapore’s corporate sector has been dominated by government-linked companies such as telephone company SingTel and industrial conglomerate Keppel Corporation, but the committee wants smaller firms to quickly scale up. It is calling for the development of new forms of private finance of Singapore companies, including easier access to venture capital funds.
Singaporean workers could no longer rely on the paper qualifications they received once they left school or university, warned the CFE. Workers must be prepared to continually pick up new skills, enter growing industries and work overseas in order to get the exposure and experience to do well.
Regulations should also be tweaked, loosened if necessary, to help promote more innovation and creativity.
It cited the Monetary Authority of Singapore’s success at building the financial technology sector, noting that the right type of regulations should foster growth rather than impede it.
“Our processes and regulations have provided a safe and predictable environment for our people and enterprises, but have grown established and less flexible over time. The government will need to be nimbler given the rapid pace of innovation and increasing global competition. We must take risks and be willing to make fundamental changes to support the emergence of potentially disruptive business activities,” said the report.
And to help companies develop, the government should also streamline its complicated grant system and support new industries through government procurement, said the CFE.
Experts said the report was a comprehensive one that addressed multiple areas of the economy.
OCBC economist Selena Ling said the report pulled together ideas that were already familiar with most people – skills upgrading, internationalisation and digitisation.
“I wasn’t expecting an economic panacea per se. Today’s economic, business and technological environment is clearly evolving faster than government committees can be formed to develop strategies,” she said.
Ong Pang Thye, managing partner of auditing and consulting firm KPMG, added: “A consistent clarion call in the CFE report was that Singapore has to be plugged in, both to the global economy and to the future digital world we will live in.”
The Singapore government is likely to start implementing some of these recommendations as soon as the upcoming Budget. Heng, a front runner to be the country’s next prime minister, will deliver the Budget.